Practice

Four U.S. senators are seeking to extend an existing tax deduction for energy-efficient retrofits of commercial and multifamily buildings. The Energy Efficient Commercial Buildings Deduction (Section 179D) is scheduled to expire at the end of 2013.

Section 179D was established by the Energy Policy Act of 2005 and allows a deduction of up to $1.80 per square foot for new buildings or renovations designed to use 50 percent less energy than ASHRAE Standard 90.1-2001. A partial deduction of up to $0.60 per square foot is also available for improvements within a building’s envelope, HVAC system, or lighting system.

The Commercial Building Modernization Act proposes specifying commercial and multifamily buildings specifically, with commercial buildings defined as those with a primary use or purpose other than residential housing, and multifamily buildings meaning structures of five or more units with a primary use of residential housing. It proposes raising the maximum deduction to $3.00 per square foot. The full text of the bill can be found here.

The legislation has been endorsed by the American Council for an Energy Efficient Economy, the Real Estate Roundtable, the Natural Resources Defense Council, and the USGBC. These organizations estimated in a joint report from 2011 that a reformed deduction would generate more than 77,000 construction, manufacturing, and service jobs.